New licensing requirements loom for off-shore gambling operators

The DCMS has signalled its intention to require all overseas remote gambling operators to have a Gambling Commission licence as a condition of advertising in Great Britain. Nick Johnson reviews the announcement.

Topic: Betting and gaming

Who: Department of Culture, Media and Sport

Where: UK

When: 14 July 2011

Law stated as at: 1 August 2011

What happened:

The UK government has announced its intention to require all overseas remote gambling operators to have a British Gambling Commission licence in place as a condition of offering their services to British consumers.

Under the present regime, operators based in EEA states or one of the DCMS's "white list" territories are allowed to advertise their services within Great Britain without having a local Gambling Commission licence or paying UK tax. This approach will now be phased out, with Britain moving to regulation on a "point of consumption" basis rather than point of origin. A transition period is proposed, with EEA and white list territories operators being eligible for an automatic transitional licence.

The expected timetable for implementation has not been announced, although the requirement to change primary legislation means nothing will change overnight.

As yet, there is no firm indication as to whether overseas operators will be expected to pay the full rate of UK remote gambling duty. However the Minister John Penrose's reference to the unfairness of off-shore operators not "bearing a fair share of the costs of regulation" suggests that some level of tax consequence will be involved.

Why this matters:

UK partners of and suppliers to overseas gambling operators will need to assess where this leaves them. Will the operator they're working with fall into line and get a Gambling Commission licence, or will they withdraw from the British market? And how is regulatory change of this kind dealt with, if at all, in their contract? This may particularly be a concern for those with long-term sponsorship deals with gambling brand sponsors.

British businesses partnering with off-shore "white-label" providers will also be well advised to look to their contracts and analyse whether the commercial structure of their deals would still be appropriate under the new regime, and whether their agreements give them a right to exit if not.

Ad agencies and media owners handling offshore gambling site advertising can at least look forward to a new, more straightforward test as to what's a permitted advertiser.